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China Deals Blow to Buyout Firms

By

Dinny McMahon

May 7, 2012 11:50 a.m. ET

BEIJING—In a blow to overseas private-equity firms that invest in China, the government's chief economic-planning agency ruled that all of the money in their funds must come from Chinese investors, or the funds will be treated as foreign.

Foreign private-equity firms thought that a regulatory opening would let their yuan-denominated funds be treated as local even if up to 5% the fund's capital came from outside of China. Such treatment would lessen some of the regulatory hurdles faced by foreign funds and allow them to better...